Spartan Motors Announces Best-Ever Quarterly Sales & Earnings
Consolidated Backlog Increases 54.7 Percent, Return on Invested Capital Improves to 22.2 Percent
CHARLOTTE, Mich., July 27 -- Spartan Motors, Inc. today reported its second consecutive quarter of record sales and earnings for the quarter ended June 30, 2006. Spartan also reported a 95.3 percent increase in net earnings and a 22.3 percent increase in net sales compared to last year's quarter.
Spartan Motors, a leading manufacturer of custom motorhome chassis, fire truck chassis, specialty vehicle chassis and emergency-rescue vehicles, reported net earnings of $5.0 million, or $0.38 per diluted share, on net sales of $109.2 million for the second quarter of 2006, compared with net earnings of $2.6 million, or $0.20 per diluted share, on net sales of $89.3 million for the second quarter of 2005.
Through the first six months of 2006, Spartan's sales increased 19.4 percent compared with the same period of last year, while earnings increased 105.8 percent compared to six months ended 2005. The company's earnings per diluted share for six months ended 2006 was $0.73 per share, exceeding its earnings for the whole of 2005, which was $0.65 per diluted share.
The company attributed its sixth consecutive quarter of improved quarter- over-quarter earnings to improvements across the board, including higher sales of its recreational vehicle (RV) and fire truck chassis, and to additional sales of military vehicle chassis. Spartan's Crimson Fire subsidiary returned to profitability in the quarter, helping the company's EVTeam operating group, consisting of Crimson Fire, Crimson Fire Aerials and Road Rescue, to narrow its loss and bring it one-step closer to profitability.
"Looking at our record-level performance, improved return on invested capital and highest-ever backlog, Spartan's future continues to move in the right direction," said John Sztykiel, president and CEO of Spartan Motors. "With our additional military contracts, Spartan is evolving its business model in line with our vision of becoming North America's premier manufacturer of specialty vehicles and chassis.
"Though we are pleased with our results this quarter, we are not satisfied with them. There remain opportunities and issues that we need to address to continue the growth in shareholder value. The good news is that there are disciplined initiatives and positive trends in place that will address both. Our record-level backlog indicates the growing strength and demand of Spartan's brands -- Spartan Chassis, Crimson Fire, Crimson Fire Aerials and Road Rescue -- and bodes well for the future."
Spartan's consolidated backlog was approximately $241.8 million as of June 30, 2006, compared with backlog of $156.3 at the end of last year's second quarter, a 54.7 percent increase year-over-year and the highest backlog in Spartan's history. Spartan Motors anticipates filling 65 to 70 percent of its current backlog orders by December 31, 2006.
On a consolidated basis, Spartan posted a return on invested capital (ROIC) of 22.2 percent in the second quarter of 2006, a 62.0 percent increase compared to ROIC of 13.7 percent for the same quarter in 2005. (Spartan defines return on invested capital as operating income, less taxes, on an annualized basis, divided by total shareholders' equity.) Spartan reported its balance sheet remains sound, and the company ended the quarter with $1.3 million in long-term debt and $6.8 million in cash and cash equivalents.
Spartan reported its gross margin improved to 17.1 percent in the second quarter of 2006, compared with 13.8 percent for the same period in 2005, reflecting improved product mix, pricing, overhead utilization and labor efficiencies. Operating margin also improved to 7.4 percent in the second quarter of 2006, compared with 4.2 percent in the same quarter of 2005.
Spartan Chassis
Quarterly net earnings at Spartan Chassis, the company's largest operating subsidiary, improved 91.8 percent in the quarter compared to last year's second quarter, while sales increased 31.9 percent. Sales of RV chassis in the quarter increased 24.3 percent compared to the second quarter of 2005 and sales of fire truck chassis increased 20.7 percent, reaching a new company record.
"We grew RV chassis sales compared to last year's quarter, despite the overall downturn in the RV market," said Sztykiel. "This improvement was due to our market share gains and the increased number of models that now feature Spartan chassis. Over the short term, current geopolitical events and economic uncertainty continue to create challenges for the RV industry. Looking over the long term, 11,000 people turn the age of 50 each day; this bodes extremely well for Spartan and the RV industry.
"This quarter was our third consecutive quarter of increased orders for fire truck chassis, and our backlog for fire truck chassis as of June 30, 2006 increased 160 percent compared to the same date last year. Our orders for fire truck chassis in the first six months of 2006 exceeded our total shipments for the whole of 2005. We will break ground in early August 2006 on a 102,000-square-foot manufacturing facility, which will give us increased capacity for existing fire truck chassis products and allow us to expand our product offerings into new markets."
Since May 2005, Spartan has been a key supplier of chassis and other components for the Cougar blast-protected military vehicle. In July 2006, BAE Systems awarded Spartan a contract to assist with the production of the Iraqi Light Armored Vehicle (ILAV), a variant of the Cougar. Both vehicles are designed to withstand explosions from mines and improvised explosive devices (IEDs), a leading source of causalities among the U.S. military in Iraq.
Spartan's sales for specialty vehicle chassis, including chassis for military vehicles, increased six fold in the second quarter of 2006 compared to last year's second quarter, though the first Cougar units only started shipping near the end of the second quarter of 2005. Spartan's specialty vehicle chassis backlog as of June 30, 2006 increased 50.2 percent compared to the same time last year.
"Spartan Chassis is serving a key role in the production of IED-resistant vehicles, which are a top priority for the U.S. military effort. Spartan designs its chassis and components to break off and deflect safely away from the Cougar and ILAV's occupants during an explosion. This design, coupled with Force Protection's V-shaped hull that absorbs the blast, has helped the Cougar serve in hundreds of operations in Iraq without a single fatality."
Emergency Vehicle Team (EVTeam)
Spartan's EVTeam, which consists of its Crimson Fire, Crimson Fire Aerials and Road Rescue subsidiaries, posted a loss for the second quarter of 2006. The EVTeam's net sales decreased less than one percent compared to the prior year's second quarter. Improved pricing and a more disciplined cost structure among the EVTeam subsidiaries and an improved net profit at Crimson Fire helped the EVTeam narrow its net loss by 7.3 percent compared to the second quarter of 2005.
Crimson Fire also increased its sales in the second quarter by 18.1 percent compared to the same period of last year and Crimson Fire Aerials increased its sales by 93.5 percent compared to the second quarter of 2005. Road Rescue reported a decrease in sales for the quarter of 41.6 percent compared to last year's quarter.
"We are very pleased with the progress of the EVTeam," Sztykiel said. "Road Rescue continues to have challenges with controlling labor costs and working through its backlog of lower-priced units. At the same time, the increased sales at Crimson Fire and Crimson Fire Aerials, along with their expanding market share, significantly increased pull-through sales of Spartan fire truck chassis. The performance of Spartan Chassis did not occur overnight, and the EVTeam continues to move in the right direction."
About Spartan Motors
Spartan Motors, Inc. (http://www.spartanmotors.com/ ) designs, engineers and manufactures custom chassis and vehicles for the recreational vehicle, fire truck, ambulance, emergency-rescue and specialty vehicle markets. The Company's brand names -- Spartan(TM), Crimson Fire(TM), Crimson Fire Aerials(TM), and Road Rescue(TM) -- are known for quality, value, service and being the first to market with innovative products. The Company employs approximately 900 at facilities in Michigan, Pennsylvania, South Carolina, and South Dakota. Spartan reported sales of $343.0 million in 2005 and is focused on becoming the premier manufacturer of specialty vehicles and chassis in North America.
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended June 30, 2006 and 2005
June 30, 2006 June 30, 2005
$-000- % $-000- %
Sales 109,227 89,341
Cost of Products Sold 90,553 76,969
Gross Profit 18,674 17.1 12,372 13.8
Operating Expenses:
Research and Development 2,966 2.7 2,212 2.5
Selling, General and Administrative 7,673 7.0 6,398 7.1
Total Operating Expenses 10,639 9.7 8,610 9.6
Operating Income 8,035 7.4 3,762 4.2
Other Income (Expense):
Interest Expense (30) (0.0) (31) (0.0)
Interest and Other Income 211 0.1 178 0.2
Total Other Income (Expense) 181 0.1 147 0.2
Earnings before Taxes on Income 8,216 7.5 3,909 4.4
Taxes on Income 3,223 2.9 1,352 1.5
Net Earnings 4,993 4.6 2,557 2.9
Basic Net Earnings per Share 0.39 0.20
Diluted Net Earnings per Share 0.38 0.20
Basic Weighted Average Common Shares
Outstanding 12,829 12,492
Diluted Weighted Average Common Shares
Outstanding 13,155 12,737
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Six Months Ended June 30, 2006 and 2005
June 30, 2006 June 30, 2005
$-000- % $-000- %
Sales 212,893 178,242
Cost of Products Sold 177,451 154,136
Gross Profit 35,442 16.6 24,106 13.5
Operating Expenses:
Research and Development 5,811 2.7 4,466 2.5
Selling, General and Administrative 14,729 6.9 12,718 7.1
Total Operating Expenses 20,540 9.6 17,184 9.6
Operating Income 14,902 7.0 6,922 3.9
Other Income (Expense):
Interest Expense (86) (0.0) (77) (0.0)
Interest and Other Income 515 0.2 340 0.1
Total Other Income (Expense) 429 0.2 263 0.1
Earnings before Taxes on Income 15,331 7.2 7,185 4.0
Taxes on Income 5,857 2.7 2,582 1.4
Net Earnings 9,474 4.5 4,603 2.6
Basic Net Earnings per Share 0.74 0.37
Diluted Net Earnings per Share 0.73 0.36
Basic Weighted Average Common Shares
Outstanding 12,765 12,506
Diluted Weighted Average Common
Shares Outstanding 12,970 12,760
Spartan Motors, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, 2006 December 31, 2005
$-000 $-000
ASSETS
Current assets:
Cash and cash equivalents $6,849 $9,702
Marketable securities 1,988
Accounts receivable, net 54,991 37,017
Inventories 50,905 44,265
Deferred income tax assets 3,745 3,745
Taxes receivable 464 990
Other current assets 6,031 1,949
Total current assets 122,985 99,656
Property, plant and equipment, net 19,716 18,478
Goodwill 4,543 4,543
Other assets 556 531
Total assets $147,800 $123,208
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $31,659 $20,746
Accrued warranty 4,719 4,503
Accrued compensation and related taxes 4,589 4,241
Accrued vacation 1,401 1,189
Deposits from customers 11,823 13,640
Other current liabilities and
accrued expenses 5,389 4,608
Current portion of long-term debt 54 53
Total current liabilities 59,634 48,980
Long-term debt, less current portion 1,290 1,317
Deferred income tax liabilities 309 309
Shareholders' equity:
Preferred stock -- --
Common stock 133 126
Additional paid in capital 42,941 37,040
Retained earnings 43,493 35,448
Accumulated other comprehensive loss -- (12)
Total shareholders' equity 86,567 72,602
Total liabilities and shareholders' equity $147,800 $123,208